EX-99.1 2 hson20140630-8kex991.htm EXHIBIT 99.1 HSON 2014.06.30 - 8K Ex 99.1



Exhibit 99.1
For Immediate Release
 
Contact:
 
David F. Kirby
 
 
 
 
Hudson
 
 
 
 
212-351-7216
 
 
 
 
david.kirby@hudson.com

Hudson Global Reports 2014 Second Quarter Results

Highest Gross Margin in Six Quarters
Progress on Strategic Actions to Focus on Core Business and Improve Efficiency

NEW YORK, NY - July 31, 2014 - Hudson Global, Inc. (Nasdaq: HSON), a leading global talent solutions company, today announced financial results for the second quarter ended June 30, 2014.

2014 Second Quarter Summary

Revenue of $167.4 million, down 2.3 percent from the second quarter of 2013, or 4.4 percent in constant currency.

Gross margin of $62.8 million, an increase of 3.8 percent from the second quarter of 2013, or 1.9 percent in constant currency. This quarter's gross margin was the highest dollar level achieved by the company since the fourth quarter of 2012.

Adjusted EBITDA* loss of $0.8 million, an improvement of 68.2 percent or 63.9 percent in constant currency, as compared with a loss of $2.5 million in the same period last year. Adjusted EBITDA included $1.3 million of charges related to the proxy contest and strategic actions.

Adjusted EBITDA* loss of $2.9 million in the first half of 2014, as compared with a loss of $7.4 million in the first half of 2013, an improvement of 61.3 percent or 59.2 percent in constant currency.

Restructuring charges of $1.1 million in the second quarter of 2014, as compared with $1.2 million in the second quarter of 2013.

Net loss of $4.4 million, or $0.13 per basic and diluted share, as compared with net loss of $5.8 million, or $0.18 per basic and diluted share in the same period last year.

* Adjusted EBITDA is defined in the segment tables at the end of this release.



1



Year-over-year gross margin growth in the company’s core business lines and geographies was widespread, including 4 percent in Asia Pacific, 9 percent in Europe, and 50 percent in RPO in the Americas, all in constant currency. This growth more than offset the decline in our eDiscovery unit in the Americas.

“We delivered gross margin growth in our major markets and continued to make substantial improvements to our bottom line,” said Manolo Marquez, chairman and chief executive officer at Hudson. “Our second quarter results are a clear indication that the changes we have put in place are translating to growth and improved financial performance, and will accelerate our path to sustained profitability.”

Stephen Nolan, chief financial officer at Hudson said, “Our focus on disciplined execution, strategic investments, and business efficiencies have resulted in improved performance across most markets and practices.”

Strategic Actions    

As was previously announced, the company engaged Duff & Phelps to begin exploring opportunities to divest the Legal eDiscovery business, and focus on the company’s core businesses that are expected to maximize stockholder value. On July 29, 2014, the company’s management and board of directors approved the plan for divestiture of the Legal eDiscovery business, which is expected to be completed within 12 months.

In addition, the company engaged AlixPartners, LLP, a premier consulting firm in the areas of organization design and operational improvement, to assist management in a comprehensive assessment of the company’s organization and operations. The engagement with AlixPartners was focused on identifying opportunities to better align the organization model to a more focused business after the divestiture of eDiscovery, to support future growth in core areas, and improve operating efficiencies and effectiveness. Based upon this work, management recommended and the board of directors approved on July 29, 2014 actions including the optimization of real estate and integration of support services and systems at the regional and corporate level. These initiatives are expected to result in a restructuring charge of up to $7 million which is expected to be taken over the next twelve months, depending on the timing of other strategic actions such as the sale of the company’s eDiscovery business. The company expects an ongoing annualized return of 1.5 - 2.0x the charge.


2



    
Regional Highlights

Americas

Americas' gross margin decreased 24 percent in the second quarter as compared with the same period in 2013. RPO continued to deliver strong results with 50 percent gross margin growth in the second quarter, after becoming the largest practice in the Americas on a gross margin basis in the first quarter of 2014. This growth was offset by declines in Legal eDiscovery and IT of 45 percent and 19 percent, respectively. The quarterly decline in Gross Margin, combined with an unusually significant increase in medical costs, resulted in an adjusted EBITDA loss of $0.1 million for the second quarter, compared with adjusted EBITDA of $1.5 million, or 4.1 percent of revenue for the same quarter a year ago.

Asia Pacific

Asia Pacific’s gross margin increased 4 percent in constant currency in the second quarter as compared with the same period in 2013. This was the second consecutive quarter of year-over-year gross margin growth, with all business lines contributing in both quarters. More specifically, growth in the region was driven by strength in talent management and permanent recruitment in China, and Australia. Gross margin increased 30 percent in China in the quarter against the prior year. And in Australia, gross margin increased 6 percent, outperforming the company’s major competitors. Talent management delivered 19 percent growth in Asia Pacific, led by large assessment and career transition projects in Australia. A concerted effort to increase front office staff in its highest potential markets and practices in Asia Pacific resulted in a 28 percent increase in fee-earners in the quarter as compared to prior year. The company expects further growth and market share gains in the region as the productivity of these new fee-earners increases. Cost reductions in support areas and real estate, together with top-line growth generated adjusted EBITDA of $1.0 million, or 1.5 percent of revenue, as compared to $0.7 million, or 1.1 percent of revenue in the second quarter of 2013.

Europe

Europe's gross margin increased 9 percent in constant currency compared with the second quarter of 2013. Against prior year, the region experienced gross margin growth in most countries. Particularly strong growth occurred in permanent recruitment in the UK and Belgium, up 18 percent and 27 percent in constant currency, respectively. Talent management in Continental Europe also grew in the quarter driven by Belgium and France, with gross margin up 7 percent compared with the prior year. Europe delivered adjusted EBITDA of $3.2 million, or 4.2 percent of revenue, as compared with adjusted EBITDA of $0.1 million, or 0.1 percent of revenue for the quarter a year ago.



3



Liquidity and Capital Resources

The company ended the second quarter of 2014 with $51.9 million in liquidity, composed of $17.9 million in cash and $34.1 million in availability under its credit facilities. This included $13.1 million of availability from the RBS facility, which will expire on August 4, 2014 and which the company expects to replace with separate facilities for the US and UK prior to such expiration date. This compares with $22.1 million in cash and $35.8 million in availability under its credit facilities at the end of the first quarter of 2014, and $28.3 million in cash and $35.8 million in availability under its credit facilities at the end of the second quarter of 2013. The company used $4.6 million in cash flow from operations during the quarter, and had $2.2 million in outstanding borrowings at the end of the second quarter.
 
Business Outlook

Given current economic conditions, the company expects third quarter 2014 revenue of between $165 million and $175 million and adjusted EBITDA of between negative $2 million and breakeven at prevailing exchange rates. In the third quarter of 2013, revenue was $163.6 million and adjusted EBITDA was a loss of $2.9 million.

Conference Call/Webcast

Hudson will conduct a conference call today at 10:00 a.m. ET to discuss this announcement. Individuals wishing to listen can access the webcast on the investor information section of the company's web site at Hudson.com.

The archived call will be available on the investor information section of the company's web site at Hudson.com.


4



About Hudson

Hudson is a global talent solutions company with expertise in leadership and specialized recruitment, contracting solutions, recruitment process outsourcing, talent management and eDiscovery. We help our clients and candidates succeed by leveraging our expertise, deep industry and market knowledge, and proprietary assessment tools and techniques. Operating in 20 countries through relationships with millions of specialized professionals, we bring an unparalleled ability to match talent with opportunities by assessing, recruiting, developing and engaging the best and brightest people for our clients. We combine broad geographic presence, world-class talent solutions and a tailored, consultative approach to help businesses and professionals achieve higher performance and outstanding results. More information is available at Hudson.com.

Forward-Looking Statements

This press release contains statements that the company believes to be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this press release, including statements regarding the company's future financial condition, results of operations, business operations and business prospects, are forward-looking statements. Words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “predict,” “believe” and similar words, expressions and variations of these words and expressions are intended to identify forward-looking statements. All forward-looking statements are subject to important factors, risks, uncertainties and assumptions, including industry and economic conditions' that could cause actual results to differ materially from those described in the forward-looking statements. Such factors, risks, uncertainties and assumptions include, but are not limited to, global economic fluctuations; the company’s ability to successfully achieve its strategic initiatives, including the divestiture of its Legal eDiscovery business; risks related to fluctuations in the company's operating results from quarter to quarter; the ability of clients to terminate their relationship with the company at any time; competition in the company's markets; risks associated with the company's investment strategy; risks related to international operations, including foreign currency fluctuations; the company's dependence on key management personnel; the company's ability to attract and retain highly skilled professionals; the company's ability to collect accounts receivable; the negative cash flows and operating losses that the company has experienced in recent periods and may experience from time to time in the future; restrictions on the company's operating flexibility due to the terms of its credit facilities; the company’s ability to achieve anticipated cost savings through its cost reduction initiatives; the company's heavy reliance on information systems and the impact of potentially losing or failing to develop technology; risks related to providing uninterrupted service to clients; the company's exposure to employment-related claims from clients, employers and regulatory authorities, current and former employees in connection with the company’s business reorganization initiatives and limits on related insurance coverage; the company’s ability to utilize net operating loss carry-forwards; volatility of the company's stock price; the impact of government regulations; restrictions imposed by blocking arrangements; risks related to activist stockholders; and risks related to limited availability under the company’s credit facilities. Additional information concerning these and other factors is contained in the company's filings with the Securities and Exchange Commission. These forward-looking statements speak only as of the date of this document. The company assumes no obligation, and expressly disclaims any obligation, to update any forward-looking statements, whether as a result of new information, future events or otherwise.


                    
###
Financial Tables Follow


5




HUDSON GLOBAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2014
 
2013
 
2014
 
2013
Revenue
 
$
167,365

 
$
171,360

 
$
329,226

 
$
337,037

Direct costs
 
104,554

 
110,856

 
208,885

 
219,857

Gross margin
 
62,811

 
60,504

 
120,341

 
117,180

Operating expenses:
 
 

 
 

 
 

 
 

Selling, general and administrative expenses
 
63,612

 
63,023

 
123,214

 
124,613

Depreciation and amortization
 
1,514

 
1,656

 
3,002

 
3,304

Business reorganization expenses
 
1,117

 
1,249

 
1,231

 
3,231

Total operating expenses
 
66,243

 
65,928

 
127,447

 
131,148

Operating income (loss)
 
(3,432
)
 
(5,424
)
 
(7,106
)
 
(13,968
)
Non-operating income (expense):
 
 

 
 

 
 

 
 

Interest income (expense), net
 
(206
)
 
(155
)
 
(350
)
 
(300
)
Other income (expense), net
 
(321
)
 
(94
)
 
(523
)
 
177

Income (loss) before provision for income taxes
 
(3,959
)
 
(5,673
)
 
(7,979
)
 
(14,091
)
Provision for (benefit from) income taxes
 
415

 
138

 
939

 
(39
)
Net income (loss)
 
$
(4,374
)
 
$
(5,811
)
 
$
(8,918
)
 
$
(14,052
)
Earnings (loss) per share:
 
 

 
 

 
 

 
 

Basic
 
$
(0.13
)
 
$
(0.18
)
 
$
(0.27
)
 
$
(0.43
)
Diluted
 
$
(0.13
)
 
$
(0.18
)
 
$
(0.27
)
 
$
(0.43
)
Weighted-average shares outstanding:
 
 

 
 

 
 

 
 

Basic
 
32,752

 
32,717

 
32,697

 
32,532

Diluted
 
32,752

 
32,717

 
32,697

 
32,532







6



HUDSON GLOBAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
 
 
 
 
 
 
 
June 30,
2014
 
December 31,
2013
ASSETS
 
 

 
 

Current assets:
 
 

 
 

Cash and cash equivalents
 
$
17,853

 
$
37,378

Accounts receivable, less allowance for doubtful accounts of $1,152 and $1,108, respectively
 
100,508

 
85,901

Prepaid and other
 
10,381

 
8,762

Total current assets
 
128,742

 
132,041

Property and equipment, net
 
14,900

 
13,822

Deferred tax assets, non-current
 
6,487

 
7,124

Other assets
 
5,791

 
5,842

Total assets
 
$
155,920

 
$
158,829

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 

 
 

Current liabilities:
 
 

 
 

Accounts payable
 
$
8,177

 
$
9,747

Accrued expenses and other current liabilities
 
57,574

 
54,722

Short-term borrowings
 
2,183

 
476

Accrued business reorganization expenses
 
2,292

 
3,810

Total current liabilities
 
70,226

 
68,755

Deferred rent and tenant improvement contributions
 
7,556

 
6,120

Income tax payable, non-current
 
2,929

 
3,872

Other non-current liabilities
 
6,600

 
5,697

Total liabilities
 
87,311

 
84,444

Stockholders’ equity:
 
 

 
 

Preferred stock, $0.001 par value, 10,000 shares authorized; none issued or outstanding
 

 

Common stock, $0.001 par value, 100,000 shares authorized; issued 33,134 and 33,543 shares, respectively
 
34

 
34

Additional paid-in capital
 
476,193

 
475,461

Accumulated deficit
 
(426,340
)
 
(417,422
)
Accumulated other comprehensive income
 
19,178

 
17,173

Treasury stock, 127 and 211 shares, respectively, at cost
 
(456
)
 
(861
)
Total stockholders’ equity
 
68,609

 
74,385

Total liabilities and stockholders' equity
 
$
155,920

 
$
158,829



7




HUDSON GLOBAL, INC.
SEGMENT ANALYSIS - QUARTER TO DATE
(in thousands)
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
For The Three Months Ended June 30, 2014
 
Hudson
Americas
 
Hudson
Asia Pacific
 
Hudson
Europe
 
Corporate
 
Total
Revenue, from external customers
 
$
26,263

 
$
65,101

 
$
76,001

 
$

 
$
167,365

Gross margin, from external customers
 
$
7,066

 
$
24,519

 
$
31,226

 
$

 
$
62,811

Adjusted EBITDA (loss) (1)
 
$
(139
)
 
$
996

 
$
3,203

 
$
(4,861
)
 
$
(801
)
Business reorganization expenses (recovery)
 
3

 
1,114

 

 

 
1,117

Non-operating expense (income),
including corporate administration charges
 
740

 
463

 
1,582

 
(2,464
)
 
321

EBITDA (loss) (1)
 
$
(882
)
 
$
(581
)
 
$
1,621

 
$
(2,397
)
 
$
(2,239
)
Depreciation and amortization expenses
 
 
 
 
 
 
 
 
 
1,514

Interest expense (income), net
 
 
 
 
 
 
 
 
 
206

Provision for (benefit from) income taxes
 
 
 
 
 
 
 
 
 
415

Net income (loss)
 
 
 
 
 
 
 
 
 
$
(4,374
)
 
 
 
 
 
 
 
 
 
 
 
For The Three Months Ended June 30, 2013
 
Hudson
Americas
 
Hudson
Asia Pacific
 
Hudson
Europe
 
Corporate
 
Total
Revenue, from external customers
 
$
37,327

 
$
62,869

 
$
71,164

 
$

 
$
171,360

Gross margin, from external customers
 
$
9,245

 
$
24,276

 
$
26,983

 
$

 
$
60,504

Adjusted EBITDA (loss) (1)
 
$
1,542

 
$
713

 
$
87

 
$
(4,856
)
 
$
(2,514
)
Business reorganization expenses (recovery)
 
325

 

 
556

 
368

 
1,249

Office integration expense and (gains) on disposal of business
 
6

 

 

 

 
6

Non-operating expense (income),
including corporate administration charges
 
825

 
490

 
1,686

 
(2,908
)
 
93

EBITDA (loss) (1)
 
$
386

 
$
223

 
$
(2,155
)
 
$
(2,316
)
 
$
(3,862
)
Depreciation and amortization expenses
 
 
 
 
 
 
 
 
 
1,656

Interest expense (income), net
 
 
 
 
 
 
 
 
 
155

Provision for (benefit from) income taxes
 
 
 
 
 
 
 
 
 
138

Net income (loss)
 
 
 
 
 
 
 
 
 
$
(5,811
)

(1)
Non-GAAP earnings before interest, income taxes, and depreciation and amortization (“EBITDA”) and non-GAAP earnings before interest, income taxes, depreciation and amortization, non-operating income, goodwill and other impairment charges, business reorganization expenses and other expenses (“Adjusted EBITDA”) are presented to provide additional information about the company's operations on a basis consistent with the measures which the company uses to manage its operations and evaluate its performance. Management also uses these measurements to evaluate capital needs and working capital requirements. EBITDA and adjusted EBITDA should not be considered in isolation or as a substitute for operating income, cash flows from operating activities, and other income or cash flow statement data prepared in accordance with generally accepted accounting principles or as a measure of the company's profitability or liquidity. Furthermore, EBITDA and adjusted EBITDA as presented above may not be comparable with similarly titled measures reported by other companies

8




HUDSON GLOBAL, INC.
SEGMENT ANALYSIS - QUARTER TO DATE (continued)
(in thousands)
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
For The Three Months Ended March 31, 2014
 
Hudson
Americas
 
Hudson
Asia Pacific
 
Hudson
Europe
 
Corporate
 
Total
Revenue, from external customers
 
$
26,863

 
$
56,430

 
$
78,568

 
$

 
$
161,861

Gross margin, from external customers
 
$
6,666

 
$
20,911

 
$
29,952

 
$

 
$
57,529

Adjusted EBITDA (loss) (1)
 
$
(649
)
 
$
110

 
$
2,353

 
$
(3,887
)
 
$
(2,073
)
Business reorganization expenses (recovery)
 
91

 

 
23

 

 
114

Non-operating expense (income),
including corporate administration charges
 
370

 
415

 
1,177

 
(1,761
)
 
201

EBITDA (loss) (1)
 
$
(1,110
)
 
$
(305
)
 
$
1,153

 
$
(2,126
)
 
$
(2,388
)
Depreciation and amortization expenses
 
 
 
 
 
 
 
 
 
1,488

Interest expense (income), net
 
 
 
 
 
 
 
 
 
144

Provision for (benefit from) income taxes
 
 
 
 
 
 
 
 
 
524

Net income (loss)
 
 
 
 
 
 
 
 
 
$
(4,544
)
 
 
 
 
 
 
 
 
 
 
 
For The Three Months Ended September 30, 2013
 
Hudson
Americas
 
Hudson
Asia Pacific
 
Hudson
Europe
 
Corporate
 
Total
Revenue, from external customers
 
$
34,842

 
$
58,274

 
$
70,471

 
$

 
$
163,587

Gross margin, from external customers
 
$
9,073

 
$
21,348

 
$
25,375

 
$

 
$
55,796

Adjusted EBITDA (loss) (1)
 
$
1,295

 
$
(460
)
 
$
440

 
$
(4,158
)
 
$
(2,883
)
Business reorganization expenses (recovery)
 
208

 

 
152

 
368

 
728

Non-operating expense (income),
including corporate administration charges
 
433

 
(335
)
 
913

 
(1,307
)
 
(296
)
EBITDA (loss) (1)
 
$
654

 
$
(125
)
 
$
(625
)
 
$
(3,219
)
 
$
(3,315
)
Depreciation and amortization expenses
 
 
 
 
 
 
 
 
 
1,529

Interest expense (income), net
 
 
 
 
 
 
 
 
 
158

Provision for (benefit from) income taxes
 
 
 
 
 
 
 
 
 
45

Net income (loss)
 
 
 
 
 
 
 
 
 
$
(5,047
)


(1)
Non-GAAP earnings before interest, income taxes, and depreciation and amortization (“EBITDA”) and non-GAAP earnings before interest, income taxes, depreciation and amortization, non-operating income, goodwill and other impairment charges, business reorganization expenses and other expenses (“Adjusted EBITDA”) are presented to provide additional information about the company's operations on a basis consistent with the measures which the company uses to manage its operations and evaluate its performance. Management also uses these measurements to evaluate capital needs and working capital requirements. EBITDA and adjusted EBITDA should not be considered in isolation or as a substitute for operating income, cash flows from operating activities, and other income or cash flow statement data prepared in accordance with generally accepted accounting principles or as a measure of the company's profitability or liquidity. Furthermore, EBITDA and adjusted EBITDA as presented above may not be comparable with similarly titled measures reported by other companies.




9




HUDSON GLOBAL, INC.
SEGMENT ANALYSIS - YEAR TO DATE (continued)
(in thousands)
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
For The Six Months Ended June 30, 2014
 
Hudson
Americas
 
Hudson
Asia Pacific
 
Hudson
Europe
 
Corporate
 
Total
Revenue, from external customers
 
$
53,126

 
$
121,532

 
$
154,568

 
$

 
$
329,226

Gross margin, from external customers
 
$
13,731

 
$
45,430

 
$
61,180

 
$

 
$
120,341

Adjusted EBITDA (loss) (1)
 
$
(788
)
 
$
1,107

 
$
5,556

 
$
(8,749
)
 
$
(2,874
)
Business reorganization expenses (recovery)
 
93

 
1,115

 
23

 

 
1,231

Non-operating expense (income),
including corporate administration charges
 
1,112

 
876

 
2,760

 
(4,226
)
 
522

EBITDA (loss) (1)
 
$
(1,993
)
 
$
(884
)
 
$
2,773

 
$
(4,523
)
 
$
(4,627
)
Depreciation and amortization expenses
 
 
 
 
 
 
 
 
 
3,002

Interest expense (income), net
 
 
 
 
 
 
 
 
 
350

Provision for (benefit from) income taxes
 
 
 
 
 
 
 
 
 
939

Net income (loss)
 
 
 
 
 
 
 
 
 
$
(8,918
)
 
 
 
 
 
 
 
 
 
 
 
For The Six Months Ended June 30, 2013
 
Hudson
Americas
 
Hudson
Asia Pacific
 
Hudson
Europe
 
Corporate
 
Total
Revenue, from external customers
 
$
74,549

 
$
119,070

 
$
143,418

 
$

 
$
337,037

Gross margin, from external customers
 
$
17,389

 
$
45,768

 
$
54,023

 
$

 
$
117,180

Adjusted EBITDA (loss) (1)
 
$
1,184

 
$
285

 
$
(25
)
 
$
(8,871
)
 
$
(7,427
)
Business reorganization expenses (recovery)
 
308

 
102

 
2,427

 
394

 
3,231

Office integration expense and (gains) on disposal of business
 
6

 

 

 

 
6

Non-operating expense (income),
including corporate administration charges
 
1,430

 
827

 
3,155

 
(5,589
)
 
(177
)
EBITDA (loss) (1)
 
$
(560
)
 
$
(644
)
 
$
(5,607
)
 
$
(3,676
)
 
$
(10,487
)
Depreciation and amortization expenses
 
 
 
 
 
 
 
 
 
3,304

Interest expense (income), net
 
 
 
 
 
 
 
 
 
300

Provision for (benefit from) income taxes
 
 
 
 
 
 
 
 
 
(39
)
Net income (loss)
 
 
 
 
 
 
 
 
 
$
(14,052
)

(1)
Non-GAAP earnings before interest, income taxes, and depreciation and amortization (“EBITDA”) and non-GAAP earnings before interest, income taxes, depreciation and amortization, non-operating income, goodwill and other impairment charges, business reorganization expenses and other expenses (“Adjusted EBITDA”) are presented to provide additional information about the company's operations on a basis consistent with the measures which the company uses to manage its operations and evaluate its performance. Management also uses these measurements to evaluate capital needs and working capital requirements. EBITDA and adjusted EBITDA should not be considered in isolation or as a substitute for operating income, cash flows from operating activities, and other income or cash flow statement data prepared in accordance with generally accepted accounting principles or as a measure of the company's profitability or liquidity. Furthermore, EBITDA and adjusted EBITDA as presented above may not be comparable with similarly titled measures reported by other companies.


10



HUDSON GLOBAL, INC.
RECONCILIATION FOR CONSTANT CURRENCY
(in thousands) (unaudited)

The company operates on a global basis, with the majority of its gross margin generated outside of the United States. Accordingly, fluctuations in foreign currency exchange rates can affect its results of operations. Constant currency information compares financial results between periods as if exchange rates had remained constant period-over-period. The company currently defines the term “constant currency” to mean that financial data for a previously reported period are translated into U.S. dollars using the same foreign currency exchange rates that were used to translate financial data for the current period. Changes in revenue, gross margin, selling, general and administrative expenses ("SG&A"), business reorganization expenses and other non-operating income (expense), operating income (loss) and EBITDA (loss) include the effect of changes in foreign currency exchange rates. Variance analysis usually describes period-to-period variances that are calculated using constant currency as a percentage. The company’s management reviews and analyzes business results in constant currency and believes these results better represent the company’s underlying business trends. The company believes that these calculations are a useful measure, indicating the actual change in operations. There are no significant gains or losses on foreign currency transactions between subsidiaries. Therefore, changes in foreign currency exchange rates generally impact only reported earnings.
 
Three Months Ended June 30,
 
2014
 
2013
 
As
 
As
 
Currency
 
Constant
 
reported
 
reported
 
translation
 
currency
Revenue:
 

 
 

 
 

 
 

Hudson Americas
$
26,263

 
$
37,327

 
$
(12
)
 
$
37,315

Hudson Asia Pacific
65,101

 
62,869

 
(1,776
)
 
61,093

Hudson Europe
76,001

 
71,164

 
5,468

 
76,632

Total
$
167,365

 
$
171,360

 
$
3,680

 
$
175,040

Gross margin:
 

 
 

 
 

 
 

Hudson Americas
$
7,066

 
$
9,245

 
$
(11
)
 
$
9,234

Hudson Asia Pacific
24,519

 
24,276

 
(613
)
 
23,663

Hudson Europe
31,226

 
26,983

 
1,787

 
28,770

Total
$
62,811

 
$
60,504

 
$
1,163

 
$
61,667

SG&A (1):
 
 

 
 

 
 

Hudson Americas
$
7,239

 
$
7,709

 
$
(14
)
 
$
7,695

Hudson Asia Pacific
23,523

 
23,545

 
(796
)
 
22,749

Hudson Europe
27,989

 
26,927

 
1,675

 
28,602

Corporate
4,861

 
4,842

 

 
4,842

Total
$
63,612

 
$
63,023

 
$
865

 
$
63,888

Business reorganization expenses:
 

 
 

 
 

 
 

Hudson Americas
$
3

 
$
325

 
$

 
$
325

Hudson Asia Pacific
1,114

 

 

 

Hudson Europe

 
556

 
15

 
571

Corporate

 
368

 

 
368

Total
$
1,117

 
$
1,249

 
$
15

 
$
1,264

Operating income (loss):
 
 
 

 
 

 
 

Hudson Americas
$
(344
)
 
$
961

 
$
4

 
$
965

Hudson Asia Pacific
(920
)
 
(114
)
 
215

 
101

Hudson Europe
2,831

 
(888
)
 
67

 
(821
)
Corporate
(4,999
)
 
(5,383
)
 

 
(5,383
)
Total
$
(3,432
)
 
$
(5,424
)
 
$
286

 
$
(5,138
)
EBITDA (loss):
 

 
 

 
 

 
 

Hudson Americas
$
(882
)
 
$
386

 
$
8

 
$
394

Hudson Asia Pacific
(581
)
 
223

 
190

 
413

Hudson Europe
1,621

 
(2,155
)
 
(22
)
 
(2,177
)
Corporate
(2,397
)
 
(2,316
)
 

 
(2,316
)
Total
$
(2,239
)
 
$
(3,862
)
 
$
176

 
$
(3,686
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) SG&A is a measure that management uses to evaluate the segments’ expenses.





11



 
 
 
 
 
 
 
 
HUDSON GLOBAL, INC.
RECONCILIATION FOR CONSTANT CURRENCY (Continued)
(in thousands) (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30,
 
2014
 
2013
 
As
 
As
 
Currency
 
Constant
 
reported
 
reported
 
translation
 
currency
Revenue:
 

 
 

 
 

 
 

Hudson Americas
$
53,126

 
$
74,549

 
$
(35
)
 
$
74,514

Hudson Asia Pacific
121,532

 
119,070

 
(7,303
)
 
111,767

Hudson Europe
154,568

 
143,418

 
9,535

 
152,953

Total
$
329,226

 
$
337,037

 
$
2,197

 
$
339,234

Gross margin:
 

 
 

 
 

 
 

Hudson Americas
$
13,731

 
$
17,389

 
$
(33
)
 
$
17,356

Hudson Asia Pacific
45,430

 
45,768

 
(2,390
)
 
43,378

Hudson Europe
61,180

 
54,023

 
3,146

 
57,169

Total
$
120,341

 
$
117,180

 
$
723

 
$
117,903

SG&A (1):
 
 
 

 
 

 
 

Hudson Americas
$
14,551

 
$
16,208

 
$
(36
)
 
$
16,172

Hudson Asia Pacific
44,254

 
45,439

 
(2,575
)
 
42,864

Hudson Europe
55,661

 
54,106

 
2,950

 
57,056

Corporate
8,748

 
8,860

 

 
8,860

Total
$
123,214

 
$
124,613

 
$
339

 
$
124,952

Business reorganization expenses:
 

 
 

 
 

 
 

Hudson Americas
$
93

 
$
308

 
$

 
$
308

Hudson Asia Pacific
1,115

 
102

 
(8
)
 
94

Hudson Europe
23

 
2,427

 
141

 
2,568

Corporate

 
394

 

 
394

Total
$
1,231

 
$
3,231

 
$
133

 
$
3,364

Operating income (loss):
 
 
 

 
 

 
 

Hudson Americas
$
(1,308
)
 
$
369

 
$
3

 
$
372

Hudson Asia Pacific
(1,555
)
 
(1,473
)
 
312

 
(1,161
)
Hudson Europe
4,804

 
(3,276
)
 
2

 
(3,274
)
Corporate
(9,047
)
 
(9,588
)
 

 
(9,588
)
Total
$
(7,106
)
 
$
(13,968
)
 
$
317

 
$
(13,651
)
EBITDA (loss):
 

 
 

 
 

 
 

Hudson Americas
$
(1,993
)
 
$
(560
)
 
$
13

 
$
(547
)
Hudson Asia Pacific
(884
)
 
(644
)
 
184

 
(460
)
Hudson Europe
2,773

 
(5,607
)
 
(202
)
 
(5,809
)
Corporate
(4,523
)
 
(3,676
)
 

 
(3,676
)
Total
$
(4,627
)
 
$
(10,487
)
 
$
(5
)
 
$
(10,492
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) SG&A is a measure that management uses to evaluate the segments’ expenses. 






 
 
 
 
 
 
 
 



12